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Purchase & Implement

Vendor Negotiation

On receiving responses to your RFP, it is important to talk to your provider about the details of the contract, ongoing support, timeline for installation and price. Read the fine print and know your rights, particularly in case of contingencies (time or budget overruns).

In addition, it is worthwhile to use much information as you have while working with your provider to get the best possible price for your services. Most vendors genuinely want to help and support school districts and as long as the economics are practical they will work with you to create a cost-effective solution.

Male worker at desk

Getting the Best Price

A good way to start a discussion with your vendor is to tell them about your plans for the district.

You should tell your vendor how quickly you think your bandwidth demands will grow, and what your bandwidth goals are at different points in the future. Given this type of information, the vendor account team will have what they need to go back to their management to push for a longer term, scalable solution for the district.

“Our provider has been a very good partner for us. It’s a long term relationship we built over the last 9 years of working together. It’s about friendship: it’s sitting down and talking about what our needs are – or them anticipating what our needs will be. That’s partnerships.”

Negotiations don’t always need to happen at the end or beginning of a contract.

Most providers can make adjustments to service level and price in the middle of a contract term, if the language in the contract and Form 470 allow for it. If you don’t think you are getting a fair price, especially towards the end of a contract term, don’t be afraid to ask for reduced pricing or more bandwidth. The cost of bandwidth is constantly dropping, so over time the price in your contract becomes less and less competitive. When it comes to changes in service mid-contract, keep in mind that E-rate program rules require that all changes be compliant with the applicant’s state and local purchasing and contracting laws, as well as allowable per the terms and conditions of the contract. E-rate program rules also require you to re-bid if you want to make a change to the service described in your establishing Form 470. This means that if your Form 470 describes a need for 100 Mbps of fiber Internet Access, you must rebid if you want to upgrade to 200 Mbps. However, if your Form 470 describes a need for sufficient fiber Internet Access, you can upgrade mid-contract without violating any rules.

When negotiating for Category 1 and Category 2 services, discuss pricing and service options to try to get the best deal.

Often, asking for more bandwidth on Category 1 connections at the same price is more successful than simply asking for a lower price. The marginal cost of adding incremental bandwidth for providers is very low. For example, upgrading from 500 Mbps to 1 Gbps does not cost the provider much. It is worth asking if they can upgrade you at no cost. For Category 2 services, a vendor may be more able to discount software, maintenance, licenses, and professional services compared to equipment. That said, it doesn’t hurt to ask for a higher discount on the equipment as well.

“Having [comparative pricing] information for negotiations made all the difference, … from my point of view, coming in with that data, pretty much put me at the top of the game. That leveled the playing field and sort of made the negotiation over.”

“I have 2600 students. Based on what the state and federal government tell me, that means that my connectivity goal for 2018 is 2.6Gbps. I want to buy more, but I can’t get there on current pricing. I ask: how can my service provider help me get there?”

When negotiating, use your competitive leverage.

If a vendor knows that they are the only player in the game, they are less likely to budge on pricing. In addition, use any pricing data you can find on nearby schools. This will help you benchmark where you should be, and give you a much stronger foundation on which to base the discussion with your service provider.

Don’t be afraid to ask your provider about the availability of dark fiber.

This service is considerably less expensive than a lit service, and if your team has the capabilities to manage the circuits internally, can result in considerable savings.

Contract Terms

Talk to your provider about how their pricing will change based on contract length or purchase size.

Providers can usually offer lower pricing with long-term contracts or a larger equipment purchase because they have more guaranteed revenue. However, since the price of bandwidth is constantly dropping, contracts over five years may not be ideal as they lock you into current pricing. Even if you get a good price with a long contract, chances are that the price you could get in three or five years will be even less.

Don’t be afraid to negotiate contract terms in addition to price.

Contract length, the service level agreement (SLA), installation fees, and termination conditions are all up for negotiation. Be sure you are comfortable with all of the language in the contract prior to signing.

If your contract includes construction, shift as much of the up-front costs from the ongoing monthly service costs (MRC) to the non-recurring costs (NRC) as possible.

Service providers have historically put up-front circuit build costs into MRC (sometimes to ensure E-rate eligibility under previous rules), significantly increasing the MRC towards the district. However, at the end of the contract term if the price is not readjusted, it can remain at a much higher than the true cost of service.

Think about how you can set your SLAs to maximize the potential for the provider to offer you a reasonable commitment without over-engineering your service levels and placing an excessive burden on them.

For example, a longer downtime that is out of school hours could be acceptable in many circumstances. By building these kinds of flexibility into your contract, your service provider may be better able to show some flexibility on price.

“If you have a discussion and nothing comes of it, then what have you lost?”

Incorporate a “Time is of the Essence Clause” into contract(s) with providers

A Time Is of the Essence Clause (TOE) is language contained in a contract that specifies that a certain time or date is important. In effect, a time is of the essence clause is saying, “the times and dates specified in this agreement are vital and mandatory to the contract.” To incentivize providers to maintain the original project schedule, it is in your best interest to include a strong TOE in your contract(s), e.g. one that states that delays in the project will result in discounts of X for every week past the original time of delivery.

A final piece of negotiation can be to ask for extras.

Many vendors can throw into a deal things like a Wi-Fi site survey or training credits. These things are of very little value to them but can make a big difference for school districts managing tight budgets.